Tuesday, 28 June 2016

T 1402/13 - Deemed to be withdrawn as no renewal fee paid, but when?

If the renewal fee is not paid by the due date, and also not by the end of the 6-month period to pay it with an additional fee, when is the European application deemed to be withdrawn? There seems to be no doubt about it since the November 2015 Guidelines for Examination: it reads in A-IV, 1.1.1 "In the event of non-payment of a renewal fee by the due date (Rule
51(1)), the application is pending up to the last day of the six-month period
for payment of the renewal fee with an additional fee (Rule 51(2)), and a
divisional application may still be filed during this period – even if the fees
are ultimately not paid. Deemed withdrawal of the application takes effect on
expiry of the six-month period." The Guidelines paragraph reflects what was written in the OJ 2007, SE 4, page
86, item 4: "Article 86(3) EPC is also deleted and the legal consequence of a failure to pay the renewal fee in due time is added to Article 86(1) EPC. It is emphasized that this does not modify the current situation, and under the Implementing Regulations to the EPC 2000 the application shall only be deemed to be withdrawn if the renewal fee and any additional fee have not been validly paid within the prescribed grace period for payment (see Rule 51(2) EPC 2000)." Nevertheless... the Board decided differently in this case.

Summary of Facts and Submissions

I. The appeal lies from the decision of the examining division dated 17 December 2012 to refuse European patent application No. 04782625.0. The appeal was filed on 13 February 2013 and the statement of grounds was submitted on 24 April 2013.

II. The renewal fee for the 12th year fell due on 31 August 2015 and had not been paid by that date.

III. On 18 February 2016, the appellant submitted a declaration stating that it "hereby withdraws their Appeal against the decision of the Examining Division upon the condition that the withdrawal is received in time to qualify for at least a 50% refund of the appeal fee."

IV. On 25 February 2016, the board issued an interlocutory decision stating that as long as the renewal fee and the additional fee had not been paid the withdrawal of the appeal could not take effect, since the appeal procedure had already been terminated beforehand as a consequence of the loss of rights due to the failure to pay the renewal fee in due time.

V. With a letter of 8 March 2016, the appellant declared that it did not challenge the board's interlocutory decision regarding the conditional withdrawal of 18 February 2016 but, instead, requested a 50% refund of the appeal fee based on the deemed withdrawal effect of the application and hence of the appeal under Article 86(1) EPC due to failure to pay the renewal fee by the due date.

VI. By 31 August 2015 the board had neither issued a preliminary opinion nor set a date for oral proceedings.

Reasons for the Decision

The appellant's request is admissible but not allowable.

1. The appellant's request is admissible.

[...]

2. The board is in a position to give a final judgment on the appellant's request.

Whereas when the intermediate decision was taken it was still possible that the legal fiction of the deemed withdrawal of the application would be reversed, it is now clear that the application is deemed to have been withdrawn since the end of August 2015 (see points 3 and 4 below).

3. The appellant is right to assume that a deemed withdrawal of the application leads to the termination of the appeal proceedings on the merits of the case.

[...]

4. In the case at stake the application was deemed to be withdrawn when the appellant failed to pay the renewal fee for the 12th year on the due date of 31 August 2015.

Article 86(1), 3rd sentence, EPC deviates from the former wording of Article 86(3) EPC 1973, thereby leaving no room for an interpretation that the application is only deemed to be withdrawn when both the due date and the period for paying the renewal fee plus the additional fee have been missed.

With regard to possible implications of this decision for Office practice as to the filing of divisional applications where annual fees are outstanding (see Guidelines A-IV.1.1.1), it seems appropriate to go into this in further detail (cf. Article 20(2) Rules of Procedure of the Boards of Appeal), although the board is aware that this decision is only of indirect relevance to that practice.

4.1 According to Article 1(1) of the decision of the Administrative Council of 28 June 2001 on the transitional provisions under Article 7 of the Act revising the European Patent Convention of 29 November 2000, Article 86 EPC has to be applied in its revised version.

4.2 Both Article 86(1), 3rd sentence, and Rule 51(2) EPC take up the exact same wording to stipulate different consequences:

If a renewal fee is not paid in due time...

According to Art. 86(1), 3rd sentence:

"... the application shall be deemed to be withdrawn."

According to Rule 51(2):

"... the fee may still be paid within six months of the due date, provided that an additional fee is also paid within that period."

There is no doubt that Rule 51(2) EPC refers to the due date of the renewal fee as specified in Rule 51(1) EPC. Thus there would have to be a reason why Article 86(1), 3rd sentence, EPC, while using the same wording, should not refer to the same date but to the due date plus the additional six months. Yet not the slightest clue is to be found in the wording and context of these provisions pointing to such an interpretation. Thus, it is to be assumed that both identical terms refer to identical events. Or, as G 4/98 (Reasons 3.3) put it: "It is generally accepted that giving different meanings to one and the same expression is not desirable and should not be undertaken lightly".

4.3 It is true that under the EPC 1973 if the due date had been missed, an application was not deemed to be withdrawn before expiry of the six-month period for paying the renewal fee plus the additional fee. However, there was a clear legal basis for this in the former wording of Article 86 EPC 1973, which first provided, in paragraph 2, for the possibility of a valid late payment "when a renewal fee has not been paid on or before the due date", whereas paragraph 3 then provided for deemed withdrawal "if the renewal fee and any additional fee have not been paid in due time". The wording, thus, clearly referred to two different events. This distinction has been lost with the new wording of EPC (2000), which leaves no room for the assumption that the identical wording might refer to two different events.

4.4 Contextual and functional considerations do not lead to a different interpretation.

4.4.1 At several points the EPC or its implementing regulations say that "the European patent application shall be deemed to be withdrawn". In this case loss of rights regularly occurs if an action (mostly the payment of a fee) is not performed "in due time" (cf. Articles 14(2), 77(2), 78(2), 94(2) and (4) and 124(2) EPC; Rules 17(2), 36(3), 39(2), 70(3), 70a(3), 70b(2), 71(7), 100(3) and 160(1) EPC). However, none of these provisions provide for a possibility, where a period for paying a fee has elapsed, of paying the missed fee plus surcharge within another time limit. This mechanism, which helps to remedy a loss of rights due to failure to observe a time limit, has been incorporated into amended Article 121 EPC, which now covers failures to observe any time limits, including time limits for paying fees. However, the due date according to Rule 51(1) EPC for paying the renewal fee is not a time limit in the narrow sense of the word. Thus, Article 121 EPC is not applicable. Instead, Rule 51(2) EPC provides for a remedy to the otherwise potentially fatal failure to observe the due date and thus serves as a grace period.

4.4.2 The existence of such a grace period, which has its basis in Article 5bis of the Paris Convention for the Protection of Industrial Property, does not change the point in time when the loss of rights occurs. The Legal Board found in J 4/86 (Reasons 3.2) that neither Article 5bis of the Paris Convention nor Article 86(3) EPC 1973 provides for a strictly logical solution to the question of whether the loss of rights, when the grace period has not been taken advantage of, is deemed to have occurred when the normal period elapsed (i.e. when the due date was missed) or on expiry of the grace period. The board therefore referred to the clear wording of the provision in question (Article 94 (3) EPC 1973) and came to the conclusion that the deemed withdrawal was not postponed until the end of the grace period. The board concluded (Reasons 4): "Accordingly, it must be assumed that from the wording and sense of that Rule loss of rights ensues on expiry of the normal period, unless use is made of the available remedy."

This decision was confirmed by the Enlarged Board in G 4/98 (Reasons 7.2): "However, Rule 85a EPC does not prolong the normal time limits, but contains what its name says, namely a grace period, a possibility to remedy an otherwise potentially fatal non-observation of a time limit. The conclusion that the relevant date is not the expiry of the grace period, but the expiry of the normal period was reached in J 4/86 concerning the failure to file a request for examination of a European patent application. The well-reasoned decision is fully convincing and since there are no reasons to distinguish the case at hand from the situation underlying J 4/86, there is nothing more to add." The Enlarged Board (Reasons 3.3) also referred to its earlier opinion in G 1/90: "The loss of rights occurs on expiry of the time limit that has not been observed (point 6 of the Reasons)". While J 4/11 was still dealing with the old version of Article 86(3) EPC 1973, these considerations are to be applied to the new version of Article 86(1), 3rd sentence, EPC.

Visser, The Annotated European Patent Convention, Haarlem, 2013, comes to the same conclusion (cf. Article 86, Point 4, penultimate paragraph).

4.4.3 The patent protection system is based on a deal between the inventor and society. The latter respects, for a limited period of time, a monopoly for the use of the invention, provided that the inventor discloses how to work the invention and that he pays adequate fees. Renewal fees have to be paid annually and increase from year to year, thereby giving an incentive to leave the invention to the public domain as soon as protection is no longer needed.

In the light of the above it seems reasonable that a grace period is provided to prevent a sudden loss of protection where the non-payment did not go along with the intention to give up protection and that protection is prolonged where the annual fee plus an additional fee has been paid. A mechanism analogous to Article 121(3) EPC may apply in this case. On the other hand it seems rather odd that the provision of a grace period was intended to prolong protection for half a year without compensation.Therefore, to assume that the loss of rights had occurred at the end of the last year that was paid for would make more sense than to assume that even where the grace period had not been used for paying the outstanding fee its mere existence led to half a year of additional cost-free protection which could, for instance and notwithstanding Article 67(4) EPC, be used for filing divisional applications or branching off national utility models.

Thus, a functional interpretation of the new wording suggests applying Article 86(1), 3rd sentence, EPC as it stands and assuming that Rule 51(2) EPC provides for the possibility that deemed withdrawal can be reversed if the annual fee and the additional fee are paid within six months after the due date.

4.5 A teleological interpretation of this wording does not lead to a different conclusion.

4.5.1 Document MR/2/00 e, the basic proposal at the Munich Conference of 2000 for the revision of the EPC, states on page 77: "Article 86(3) EPC is also deleted and the legal consequence of a failure to pay the renewal fee in due time is added to Article 86(1) EPC. It is emphasised that this does not modify the current situation, and pursuant to the future Implementing Regulations, the application shall only be deemed to be withdrawn if the renewal fee and any additional fee have not been validly paid within the prescribed grace period." This intention was not discussed by the member states during the legislative process.

4.5.2 However, the drafters failed to incorporate such a provision into the Implementing Regulations. As set out above, Rule 51(2) EPC contains a grace period but does not say anything about the point in time at which the application is deemed to be withdrawn. Thus, the consequences of non-payment can only be derived directly from the Convention.

4.5.3 Moreover, the wording of Article 86(1), 3rd sentence, EPC being clear and without ambiguities and its interpretation not leading to unreasonable results, it seems to be more than doubtful whether it would be suitable at all to refer to the travaux préparatoires in construing Article 86(1) EPC (see T 1553/13, Reasons 8.4.1 to 8.4.3; G 1/11, Reasons 3).

It follows from Article 31(1) of the Vienna Convention on the Law of Treaties and G 5/83 that the EPC should be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the EPC in their context and in the light of its object and purpose.

Article 32 of the Vienna Convention justifies the use of supplementary means of interpretation in order to confirm the meaning resulting from the application of Article 31 or if the interpretation under Article 31 leaves the meaning ambiguous or obscure or leads to a manifestly absurd or unreasonable result.

The board considers that neither of these options is the case. Thus supplementary means of interpretation could only be used to confirm the meaning resulting from the application of Article 31 of the Vienna Convention.

4.5.4 However, even taking MR/2/00 e into account, no other interpretation would be arrived at. When construing a legal provision, it is the objective will of the legislator which has been expressed therein that is relevant. Subjective notions of the participants in the legislative process as to the meaning of a provision are of no relevance. Any motives that might have been expressed during the legislative process but have not been reflected by the final wording of the legal provisions (cf. point 4.5.2 above) thus cannot influence the objective interpretation of those provisions.

4.6 Therefore, the clear wording of Article 86 (1), 3rd sentence, EPC is to be applied.

5. [...].

5.4 The fact that Article 86(1), 3**(rd) sentence, EPC and other provisions in the EPC (see point 4.4.1 above) use the wording "is deemed to be withdrawn" does not imply that Rule 103(2) EPC is to be applied. Where the EPC or its implementing regulations use this term, they entail that the application shares the same fate as applications that have been withdrawn. Thus, what is deemed to have occurred is the result of the withdrawal but not the declaration that leads to this result. In other words, the fiction determines the legal consequences of a failure to act in due time by giving the application the status of a withdrawn application. This does not mean that the applicant has to be treated as if it had actively declared the withdrawal of its application.

5.5 This result seems to be particularly apt when comparing the consequences for the board's handling of a declared withdrawal and a deemed withdrawal due to non-payment of the renewal fee.

In the first case, the board is notified by a clear statement that no more work has to be done on this case, because the declaration of withdrawal leads to instant termination of the appeal proceedings.

In the latter case, the board is left in uncertainty for at least six months, followed by the possibility that the appellant might request re-establishment for a further two months. Although it might be wise not to do any work on files where the renewal fee is outstanding, it may happen that boards continue to invest time in such cases, for instance where oral proceedings have already been scheduled. Furthermore, constantly monitoring whether the renewal fee has been paid is an extra task which would not be necessary if a withdrawal had been declared explicitly.

5.6 The result is also supported by the travaux préparatoires that may be consulted in this respect, cf. above point 4.5.3, last paragraph.

CA/90/13 Rev. 1 gives the following explanation concerning the proposal to extend Rule 103 EPC (emphasis by underlining added by the board):

"A. INTRODUCTION OF AN ADDITIONAL OPTION OF PARTIAL REIMBURSEMENT OF THE APPEAL FEE IN RULE 103 EPC

Guidelines (November 2015), General Part, 3: as a general rule, parties can expect the EPO to act in accordance with the Guidelines until such time as they – or the relevant legal provisions – are amended. Notices concerning such amendments are published in the Official Journal of the EPO and on the EPO website.

The clear statement in the Guidelines about when the loss-of-rights occurs / the pendency ends, which is fully consistent with the statements given by the EPO when the EPC was amended, seems to be a very solid ground to base your expectations on as applicant!!

Indeed, but still the Case Law gives the big picture here.http://www.epo.org/law-practice/legal-texts/html/caselaw/2013/e/clr_iii_s_1.htm

Perhaps the Board wanted to ensure that there will be no new trend, wherein an applicant does not pay the extra fees of the grace period, yet takes advantage of this extra time period for its own reasons.

" the drafters failed to incorporate such a provision into the Implementing Regulations" - I wonder why. Hopefully the EPO and Administrative Council will finally amend the Implementing Regulations. Let's also hope that the incorrect filing of divisionals during a grace period of the parent is not a ground for revocation.

The board seems to say that Art. 86(1) requires an application to be deemed withdrawn from the moment the renewal fee isn’t paid at the regular time. Implementing regulations can’t contradict the convention (Art. 164(2)).

On the other hand, art. 86(1) says that renewal fees shall be paid ‘in accordance with the Implementing Regulations’. So maybe it would be enough if the Rules are explicit on this point.

We’ll probably never know though, because I don’t see the Administrative Council stepping in to change this.

The Board has a very good point: the articles and rules are clear. A logic and normal reading states that the application is deemed withdrawn on the due date (i.e. at the start of the grace period). The only possible reason to consider the application to be still pending during the grace period can be found in the Travaux Préparatoires. During my EQE preparations, it actually took me a quite some time before I could find a legal basis for the current approach of the EPO.

Having EPO practices that conflict with the normal/logical reading of the articles and rules is to be avoided. I assume that the EPO will have to change its current practice. Amending the EPC will take time and there seems to be limited benefit in doing so.

The major issue now is, indeed, what the effect will be for divisionals that have been filed in accordance with the guidelines. I would not hesitate to use the argument in revocation proceedings, but there is indeed the principle of legitimate expectations...

Yes it's not in the list of grounds, but there might still be ways around that. A first option that springs to mind is arguing that in view of Art. 76(1) and R. 36(1), the application would not be entitled to the filing and priority date of the application and proceed under the ground of novelty. It's far from ideal, as there is no real option to attribute another filing date to the divisional application, but it might still be worth a shot and there might be other options as well.

No changes were made to GL A-IV, 1.1.1 in the November 2016 edition after T 1402/13 was issued.The Guidelines of Novenber 2016 still consider the application deemed to be withdrawn at the end of the 6 month period of R.51(2):

In the event of non-payment of a renewal fee by the due date (Rule 51(1)), the application is pending up to the last day of the six-month period for payment of the renewal fee with an additional fee (Rule 51(2)), and a divisional application may still be filed during this period – even if the fees are ultimately not paid. Deemed withdrawal of the application takes effect on expiry of the six-month period.

Once the application is deemed to be withdrawn, a divisional application can only be validly filed if the loss of rights, as communicated pursuant to Rule 112(1), is subsequently remedied. In such a case, the application is deemed to have been pending throughout.

The situation is even less clear, I suppose. Does anyone have a suggestion regarding how to answer such a question within the EQE exam (or pre-exam)? I suppose this is not a major problem for paper D, where you can argue as long as you can, but what about the pre-exam, where a yes or no is required? The Boards are binded only by the Covnention and hence the GL follow the way at which the decisions are pointing to. What is the best to use as the most solid ground when answering such questions in exams? The Guidelines, the Boards decisions, or the Case Law as whole?

My approach would be, for the EQE: mention GL 2016 as well as T 1402/13, explain both, and conclude that you follow the Guidelines. For pre-exam: if you are sure that this is the issue the question is about, don't think about it, follow the Guidelines, and diarize the time limit for an appeal.

R51(2) is now amended as ""If a renewal fee is not paid on the duedate under paragraph 1, the fee maystill be paid within six months of thesaid date, provided that an additionalfee is also paid within that period. Thelegal consequence laid down inArticle 86, paragraph 1, shall ensueupon expiry of the six-month period." OJ 2016 A102I think the situation is more clear now.